Health system-payer negotiations 'coming to a head'

Contract negotiations between health systems and payers are a routine part of doing business, but ongoing cost and workforce pressures, inflation and widespread Medicare Advantage challenges are forcing health systems to push back against the dynamics of the payer-provider relationship.

Health systems continue to recover after a tumultuous few years, but many still operate with margins below or close to zero. The nation's largest payers, on the other hand, reported billions in profits in 2023.  

At $16.4 billion in total earnings in 2023, a 14.2% year-over-year increase, UnitedHealthcare's earnings were the highest among commercial payers and it has been among the most difficult to renegotiate contracts with, Stuart Kilpinen, Trinity Health's senior vice president of payer strategy and product development, told Becker's.

"We've had difficult negotiations with UnitedHealthcare over the years and with some other payers, but now it's coming to a head due to the impact of inflation, Medicare Advantage and the pressures on that program, and the fact that we can no longer sustain and accept it," Mr. Kilpinen said. "We're taking a firmer stand to protect the care that our patients and communities need."

Trinity Health of New England, part of Livonia, Mich.-based Trinity Health, is involved in a public dispute with UnitedHealthcare over a new contract to replace the current deal that expires at midnight on June 30. But several of Trinity's ministries and hospitals are currently renegotiating contracts with UnitedHealthcare, including:  

  • Loyola Medicine (Maywood, Ill.)
  • St. Peter's Health Partners (Albany, N.Y.)
  • St. Mary's Hospital (Athens, Ga.)
  • Saint Joseph Health System (Mishawaka, Ind.)
  • Holy Cross Health (Fort Lauderdale, Fla.)
  • Saint Agnes Medical Center (Fresno, Calif.)
  • MercyOne (Des Moines, Iowa)
  • Genesis Health System (Davenport, Iowa)

Trinity argues that it needs to be paid fairly and for payers to recognize the effect that inflation has had on health systems' costs to deliver care and their ability to be sustainable and competitive. 

A spokesperson for UnitedHealthcare told Becker's that the company's goal is to keep THNE physicians in its network at a cost that's affordable for the people and employers it serves. "That's why we continue to compromise and are proposing meaningful rate increases that ensure the health system continues to be fairly and appropriately reimbursed at market-competitive rates similar to their peers throughout the state," according to a statement.

Price transparency data has led to very collaborative and successful negotiations with some payers, but there are still a lot of holes in the data as payers and providers continue to work to make that information more usable.  

"We want to be able to evaluate transparency data — not only to evaluate how we are reimbursed versus other health systems – but also how our contracts compare payer to payer," Mr. Kilpinen said. "Many payers are concerned about having competitive contracts, which we're in agreement with. We want balance and fair payment for us and we want it to afford the payers that we work with equivalent payment rates as well. It's been better with more access to that transparency data, which is a key point in our negotiations, but there's still a long way to go."

Trinity is also identifying opportunities to align incentives with commercial payers and CMS. Last year, Trinity Health Integrated Care ACO generated $41.2 million in shared savings for Medicare, according to the health system. 

"We're all in on taking accountability for cost and quality, and that can be a bridge for some of the more successful negotiations that we've had," Mr. Kilpinen said. "We've been able to implement those types of programs so that we can create those win-win situations for patients, for us and the payers that we work with."

However, one big area of concern for hospitals and health systems across the country is getting paid appropriately for care provided through Medicare Advantage programs, which continue to see excessive prior authorization denial rates and slow payments from insurers. 

"We are experiencing challenges with Medicare Advantage, and with UnitedHealthcare in particular," Mr. Kilpinen said. "Over 10% of the claims we submit are denied initially, which puts nearly $100 million of annual revenue at risk for us. A lot of that is related to Medicare Advantage."

CMS and the federal government continue to apply downward pricing pressure on Medicare Advantage. Trinity said it is willing to help address the underlying cost, but work collaboratively through incentive programs. 

"What we can't stand for is increased denials, downgrades and delays in payment. That's one of the issues we're trying to solve with UnitedHealthcare — to balance that and have reasonable approaches to addressing authorization, precertification and those types of programs," Mr. Kilpinen said.

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